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Some insights regarding the optimal reorder period in periodic review inventory systems

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  • Silver, Edward A.
  • Robb, David J.

Abstract

The periodic review inventory system is not only pervasive, but also has an extensive literature dealing with various aspects, from its theoretical underpinnings through to its performance. However, the selection of the best review period and its behaviour with respect to basic inventory parameters such as demand and supply variability appears to be poorly understood. In this paper we treat the normal and gamma distributions which are probably the two most commonly used distributions of demand over the key (protection) time interval in a periodic review system. We show that the total cost function is not necessarily well behaved as a function of the review period; in particular, it can be non-convex, which complicates the determination of the best value of the review interval. Also we demonstrate and explain how the best review period changes as the values of various parameters are modified. Some of these changes are initially counterintuitive in nature. Managerially oriented interpretations should also be helpful to organisations seeking improvement in inventory system performance.

Suggested Citation

  • Silver, Edward A. & Robb, David J., 2008. "Some insights regarding the optimal reorder period in periodic review inventory systems," International Journal of Production Economics, Elsevier, vol. 112(1), pages 354-366, March.
    • Handle: RePEc:eee:proeco:v:112:y:2008:i:1:p:354-366
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    2. Tyworth, John E., 2018. "A note on lead-time paradoxes and a tale of competing prescriptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 109(C), pages 139-150.
    3. Hedenstierna, Carl Philip T. & Disney, Stephen M., 2016. "Inventory performance under staggered deliveries and autocorrelated demand," European Journal of Operational Research, Elsevier, vol. 249(3), pages 1082-1091.
    4. Petropoulos, Fotios & Wang, Xun & Disney, Stephen M., 2019. "The inventory performance of forecasting methods: Evidence from the M3 competition data," International Journal of Forecasting, Elsevier, vol. 35(1), pages 251-265.
    5. Ray, Saibal & Song, Yuyue & Verma, Manish, 2010. "Comparison of two periodic review models for stochastic and price-sensitive demand environment," International Journal of Production Economics, Elsevier, vol. 128(1), pages 209-222, November.
    6. Tang, Shaolong & Wang, Wenjie & Yan, Hong & Hao, Gang, 2015. "Low carbon logistics: Reducing shipment frequency to cut carbon emissions," International Journal of Production Economics, Elsevier, vol. 164(C), pages 339-350.
    7. Fang, Xin & Zhang, Cheng & Robb, David J. & Blackburn, Joseph D., 2013. "Decision support for lead time and demand variability reduction," Omega, Elsevier, vol. 41(2), pages 390-396.
    8. Dreyfuss, Michael & Giat, Yahel, 2019. "Allocating spares to maximize the window fill rate in a periodic review inventory system," International Journal of Production Economics, Elsevier, vol. 214(C), pages 151-162.

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